Pfizer Needs Clearer Goals

Pfizer Needs Clearer Goals

Pfizer’s record with mergers hardly inspires confidence. The drug giant’s last two huge acquisition attempts failed. It could try another merger to cut its tax rate, it could enter one or more potentially heated auctions or it could split up. If it wants to succeed at deal making, the company needs clearer goals.

Pfizer, led by Ian C. Read, is still smarting from its rejected attempt to buy AstraZeneca for nearly $120 billion in 2014 and the more recent $160 billion acquisition of Allergan, which the two sides agreed to but then canceled last month after the Treasury Department’s clampdown on tax-driven deals.

The new rules against so-called inversions, in which cross-border mergers help American companies change their tax domiciles, sent Pfizer back to the drawing board. So far, Mr. Read and his colleagues have responded only with a variety of scribbles.

Mr. Read said this week that he would still entertain deals of any size, and he has ruled out another big tax-reducing acquisition only for the immediate future. One relatively small but potentially expensive target could be Medivation. The company, a cancer-focused biotechnology business, is fighting off an unsolicited offer from Sanofi, and its takeover defenses are weak. Pfizer has expressed interest, too, according to Reuters sources.

The company has also been considering breaking up since 2013. That option has excited shareholders who are skeptical of Pfizer’s deal-making prowess. Mr. Read has created value for shareholders by disposing of assets such as the animal health unit Zoetis. The spinoff’s shares have comfortably outperformed those of its former parent.

Mr. Read says that a split is still on the table and that Pfizer will decide whether to do it by the end of this year, with a view to making it happen by the end of 2017. But over the years, the company has seemed more entranced with possible acquisitions. Actually setting a strategy might impress investors more than keeping all options open.